China is the Bitcoin mining capital of the world primarily because of the availability of clean hydroelectricity in abundance at an affordable price. This is the primary reason Chinese Bitcoin mining farms are responsible for over 60% of Bitcoin mining. With the monsoon season just around the corner and Bitcoin Halving less than a month away, this should be the perfect time for miners to invest in new mining pools and pieces of equipment.
However, the mining industry in China seems to have been affected dearly by the black Thursday crash or March 12 crash which saw the price of Bitcoin fall by almost 50%. And the monsoon season which would also mean the mining season does not seem to generate the same level of interest from the local mining industry.
It’s a catch 22 situation for miners, where the monsoon season would ensure cheaper fuel to operate their mining machines, but the falling price of Bitcoin would not help them make any profit. And if the Block Reward Halving in the coming month does not push the price of Bitcoin into bullish domain then it would make it even worse for them to continue as the reward per block would be cut to half. Huang Fangyu, co-founder of ValarHash which operates 1THas mining pool and sells cloud mining contracts shared the same concern saying,
“If bitcoin’s price doesn’t go up post-halving, then who’s going to buy new equipment to fulfil this capacity?”
A Lot Depends on the Price of Bitcoin Post Halving
Bitcoin Halving is considered to be a highly bullish event given it would cut the supply of Bitcoin produced per block to half. This means the supply of the Bitcoin would be reduced by half while the demand increases, which would take the price higher. The past events of Bitcoin halving have resulted in bullish rallies in upwards of 1000%, while that might not be the case this time around as the volatility has gone down significantly since the last halving. However, looking at the current price movement where Bitcoin is struggling to hold above $7,000 for the past month, the bearish tendency looks stronger.
Bitcoin network’s hashpower input (the computational power used by miners) has reached 113 million terahashes per second (TH/s) which comes from a range of mining machines in the market and in total Bitcoin is consuming about 6 GWh of electricity enough to power 600 US households for the whole year. The higher hashpower is also a sign of a secure and healthy network, as it suggests that the number of miners on the network verifying transactions is high.
However, if Bitcoin price fails to rise above its current $7,000 mark post halving, the older mining machines will not be profitable to operate which would be shut down, and it would, in turn, bring down the overall hash input on the network.
Bitcoin Mining a Dynamic Game
At the current rate and hash input, it would not be affordable for old mining machines to compete with the latest mining machines, however, Bitcoin mining is a dynamic game the lower hashrate input would also mean lower competition for the mined coins. Thus, it will encourage mining farms to buy older machines in times of lower hashpower input and once the hashpower rises above 120 million they might have to switch off the old equipment again. Valarhash’s Huang explained the same, saying,
“The hashrate after halving will drop to a point that older miners like the AntMiner S9 could become profitable again with electricity promotions by mining farms. Then the hash rate will go up and some will have to turn off again. That will be a headache.”
At present, the mining industry is keenly monitoring the Bitcoin price movement to plan their next move and whether they would be buying new equipment or have to wait for the hashpower to drop post halving to use older mining machines.
The Bitcoin’s Bearish Momentum pre-halving Surges Demand For Second Hand Market for Mining Machines
The current bearish momentum and dilemma of the mining industry over procuring new mining machines has sprung the second-hand market for the old mining machines. The old and used Antiminer S9s are being sold at very cheap price. One of the distributors on Alibaba.com is selling used Antiminer anywhere between $20 to $80. To put things in perspective, when these Antminers S9s were launched during the peak of the crypto market in 2017, they were being sold at around $3,000.
If Bitcoin price fails to pick up post halving these antminers can still prove to be profitable. If Bitcoin price even trades above $10,000 almost all of these mining machines would be profitable enough to run.